‘Who is making the margins?’ McCain closure and war price spike crushing NZ vege growers

Wednesday, 25 March 2026

The closure of McCain’s Hawke’s Bay factory adds to the pressure on vegetable growers already dealing with squeezed margins and the cost impact of the Middle East war, Hawke’s Bay grower Hugh Ritchie says.

Frozen food giant McCain has announced it is closing its vegetable processing plant in Hastings by January next year. After reviewing operations at the site, it was unable to find a sustainable pathway under the current model, it said.

The news follows Heinz Wattie’s recent announcement that it plans to close three factories – in Auckland, Christchurch and Dunedin – and stop selling a range of products.

And it comes at a time sectors and businesses nationwide are struggling to deal with the impact of the Middle East war on fuel prices and supply.

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Hugh Ritchie is the owner of Drumpeel Farms in Hawke’s Bay, and grows peas, corn and carrots among other crops for McCain. He said about a quarter of the farm’s total gross annual income will be lost with the closure of the factory.

It was the only vegetable processing factory on that scale in the region, and it would be difficult to pivot and use the same scale of production to go somewhere else, he said.

“Seeds and cereals are the only other real options, and cereals are under pressure if you look globally. So it’s a significant blow ‒ it’s a good rotational crop, and ensures diversity in the business, and now that has been removed.”

But he was not surprised by the announcement as there had been signs of problems and once Heinz announced its plans, he could see McCain following suit.

“We need to understand the environment these businesses are operating in,” he said. “Fundamentally, when it comes to food production ‒ be it vegetables, dairy, or wheat ‒ there are limited margins for growers and processors.”

That’s why he was not blaming McCain. They were saying, like Heinz, that those factory sites could not make money, so the question was why, he said.

“I know what I’m paying, and processors like growers are operating at margins that don’t seem realistic. With peas, they are under $2 a kg to grow, but then look at the cost of frozen peas in the supermarket [selling for between $3 and $6 per 1kg bag].

“So who is making the margins? How do we get disclosure? Banks have to disclose their margins. Why can’t everyone in this business ‒ growers, processors, retailers ‒ be in the same boat?”

He would like to see transparency around margins and the value being captured as there was a real imbalance for growers, and an investigation into what was going on was required.

Ritchie said growers were also coming under pressure from the influx of cheaper overseas products ‒ which did not have to conform to the same standards as domestic products ‒ on to the market.

And now, the impact of the war in the Middle East on fuel and fertiliser prices was dealing growers another blow, he said.

“We have done a lot of work previously to reduce our fuel costs, which has been helpful, but there has been a significant increase in fuel costs for our operation.

“With fertiliser the price has gone up by about $180 a tonne already, and we’d expect to see that increase more as a large amount of fertiliser comes from the Middle East.

“We used to get nitrogen-rich fertiliser from the Kapuni urea plant [in Taranaki], but now that’s changed. That has the most impact.”

The tightening up of fuel and shipping imported products to New Zealand could lead to less coming in, or more expensive prices for the products, which could impact positively on local growers, he said.

“But it also makes it more expensive to export products too, so it goes both ways.”

In Ritchie’s view, the broader crisis should provide an opportunity to investigate the problems in the system, make the structural changes required and build a better, more sustainable system.

“Because if you can’t grow food effectively and efficiently for a realistic return, it’s a serious issue of concern, economically and in terms of food security.”